UK companies cut marketing budgets for first time in seven years according to the Q3 2019 IPA Bellwether Report, as economic and Brexit-related uncertainties led to wait-and-see approach.

The contraction was only slight, as a net balance of -0.5% of firms registered downward revisions to their total marketing budgets during the quarter (18.2% cut expenditure, while 17.7% reported budget growth); nearly two-thirds of the Bellwether panel (64.1%) reported no change.

Some were choosing to switch away from big-ticket marketing drives to save money, others were re-allocating budgets to online and social media-based campaigns, keeping total budgets unchanged in the process.

The internet category remained the top performer in the third quarter. A net balance of +11.1% of firms observed budget growth here (+11.5% previously). Data-driven campaigns and a greater push towards social media advertising also underpinned the continued rotation into the digital space.

Within search/SEO, which lies within the broader internet category, however, the net balance declined to +6.1%, from +9.9%, its lowest since Q4 2018. Meanwhile, mobile advertising budgets were reduced for the first time since the end of last year. The net balance dipped into negative territory (-0.6%) following stagnation in the second quarter (+0.0%).

Main media advertising budgets were placed on hold during the third quarter (+0.0%) following some relatively solid upward revisions in the first two quarters of the year (+5.2% and +5.6% respectively).

Joe Hayes, Economist at IHS Markit and author of the Bellwether Report, observed that marketing, like the rest of the economy, is suffering “as a result of spending delays, firms placing projects on hold and subdued business confidence”. One inevitable consequence is that discretionary spending is shelved in order to protect profit margins.

“Perhaps the most discouraging sign,” he added, “is to see firms sitting on the fence regarding main media advertising, which is a vital form of long-term brand building, following resilient budget growth in the two previous quarters. Overall, as long as political and economic uncertainties remain at large, it will be surprising to see noteworthy boosts to marketing spending.”

The remaining types of marketing all contracted, with the worst performer being market research (-16.9% from -2.9%); events marketing budgets were also revised downwards for the first time in a year (-5.9% from +4.8%).

Panellists continued to have a gloomy outlook on the prospects for both their own businesses (-9.4%) and the wider industry (-25.0%), but the Bellwether Report believes businesses will be eager to accelerate marketing efforts once uncertainty has cleared and anticipates adspend growth rates picking up from 2020 onwards.

Sourced from Bellwether Report